UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(MARK
ONE)
x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
quarterly period ended March 31, 2009
o TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the
transition period from ___________ to __________
Commission
file number: 000-32603
ARBIOS SYSTEMS,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
91-1955323
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
200
E. Del Mar Blvd., Suite 320, Pasadena, CA
|
91105
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(626)
356-3105
(Registrant's telephone number,
including area code)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer”
and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
(do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No x
On April
30, 2009, there were 24,356,247 shares of common stock, $.001 par value per
share, issued and outstanding.
ARBIOS
SYSTEMS, INC.
FORM
10-Q
|
|
PAGE
NO.
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements:
|
|
|
|
|
|
Condensed
Balance Sheets as of March 31, 2009 (unaudited) and December
31, 2008 (audited)
|
4
|
|
|
|
|
Condensed
Statements of Operations for the three months ended March 31, 2009 and
2008 and from August 23, 2000 (inception) through March 31, 2009
(unaudited)
|
5
|
|
|
|
|
Condensed
Statements of Cash Flows for the three months ended March 31, 2009 and
2008 and from August 23, 2000 (inception) through March 31, 2009
(unaudited)
|
6
|
|
|
|
|
Condensed
Statement of Stockholders’ Equity (Deficit) from August 23, 2000
(inception) through March 31, 2009 (unaudited)
|
7
|
|
|
|
|
Notes
to Condensed Financial Statements
|
12
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
19
|
|
|
|
PART
II. OTHER INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
20
|
|
|
|
Item
1A.
|
Risk
Factors
|
20
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
20
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
20
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
20
|
|
|
|
Item
5.
|
Other
Information
|
20
|
|
|
|
Item
6.
|
Exhibits
|
20
|
|
|
|
SIGNATURES
|
21
|
ITEM
1. Condensed Financial Statements
ARBIOS SYSTEMS,
INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED BALANCE
SHEETS
|
|
|
March 31,
2009
|
|
|
December
31,
|
|
ASSETS
|
|
(Unaudited)
|
|
|
2008
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
116,700 |
|
|
$ |
370,686 |
|
Restricted
Cash
|
|
|
100,000 |
|
|
|
- |
|
Prepaid
expenses
|
|
|
147,835 |
|
|
|
21,506 |
|
Receivable
|
|
|
200,000 |
|
|
|
- |
|
Total
current assets
|
|
|
564,535 |
|
|
|
392,192 |
|
|
|
|
|
|
|
|
|
|
Receivable
|
|
|
- |
|
|
|
200,000 |
|
Property and
equipment-Net
|
|
|
5,258 |
|
|
|
6,177 |
|
Investment
|
|
|
- |
|
|
|
86,209 |
|
Other
assets
|
|
|
750 |
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
570,543 |
|
|
$ |
685,328 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
89,583 |
|
|
$ |
194,046 |
|
Deposit from Arbios
Acquisition Partners, LLC
|
|
|
100,000 |
|
|
|
- |
|
Accrued
expenses
|
|
|
345,000 |
|
|
|
286,888 |
|
Total
current liabilities
|
|
|
534,583 |
|
|
|
480,934 |
|
|
|
|
|
|
|
|
|
|
Liabilities subject to settlement
under reorganization proceedings
|
|
|
111,029 |
|
|
|
- |
|
Long term contract
obligations
|
|
|
150,000 |
|
|
|
150,000 |
|
Total
liabilities
|
|
|
795,612 |
|
|
|
630,934 |
|
|
|
|
|
|
|
|
|
|
Stockholders' (deficit)
equity
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value;
100,000,000 shares authorized; 24,356,247 and
25,792,747
|
|
|
|
|
|
shares
issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
|
|
|
24,356 |
|
|
|
25,792 |
|
Additional paid-in
capital
|
|
|
21,618,511 |
|
|
|
21,617,075 |
|
Deficit accumulated
during the development stage
|
|
|
(21,867,936 |
) |
|
|
(21,588,473 |
) |
Total
stockholders' (deficit) equity
|
|
|
(225,069 |
) |
|
|
54,394 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' (deficit) equity
|
|
$ |
570,543 |
|
|
$ |
685,328 |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS SYSTEMS,
INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENTS OF
OPERATIONS
|
(Unaudited)
|
|
|
For the three months ended March
31,
|
|
Inception
to
|
|
|
|
2009
|
|
|
2008
|
|
|
March 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
320,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
119,619 |
|
|
|
719,494 |
|
|
|
13,361,670 |
|
Research and
development
|
|
|
- |
|
|
|
710,426 |
|
|
|
9,325,632 |
|
Total
operating expenses
|
|
|
119,619 |
|
|
|
1,429,920 |
|
|
|
22,687,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before reorganization
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
and other income
(expense)
|
|
|
(119,619 |
) |
|
|
(1,429,920 |
) |
|
|
(22,366,336 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization costs and other
income (expense):
|
|
Reorganization
costs
|
|
|
(73,864 |
) |
|
|
- |
|
|
|
(73,864 |
) |
Interest
income
|
|
|
229 |
|
|
|
20,300 |
|
|
|
497,748 |
|
Gain on Sale of
HepatAssist program (net)
|
|
|
- |
|
|
|
- |
|
|
|
404,863 |
|
Loss on
investment
|
|
|
(86,209 |
) |
|
|
- |
|
|
|
(86,209 |
) |
Interest
expense
|
|
|
- |
|
|
|
- |
|
|
|
(244,138 |
) |
Total
reorganization costs and other income (expense)
|
|
|
(159,844 |
) |
|
|
20,300 |
|
|
|
498,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(279,463 |
) |
|
$ |
(1,409,620 |
) |
|
$ |
(21,867,936 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$ |
(0.01 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
|
24,499,897 |
|
|
|
25,595,769 |
|
|
|
|
|
The accompanying notes are an integral part of
these condensed financial statements.
ARBIOS SYSTEMS,
INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENTS OF CASH
FLOWS
|
(Unaudited)
|
|
|
For
the three months ended March 31,
|
|
|
Inception
to
|
|
|
|
2009
|
|
|
2008
|
|
|
March
31, 2009
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(279,463 |
) |
|
$ |
(1,409,620 |
) |
|
$ |
(21,867,936 |
) |
Adjustments to
reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
used in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of debt discount
|
|
|
- |
|
|
|
- |
|
|
|
244,795 |
|
Depreciation
and amortization
|
|
|
919 |
|
|
|
10,796 |
|
|
|
336,956 |
|
Patent
rights impairment
|
|
|
- |
|
|
|
- |
|
|
|
91,694 |
|
Issuance
of common stock, options and warrants for
compensation
|
|
|
- |
|
|
|
305,362 |
|
|
|
4,071,460 |
|
Issuance
of warrants for patent acquistion
|
|
|
- |
|
|
|
- |
|
|
|
74,570 |
|
Settlement
of accrued expense
|
|
|
- |
|
|
|
- |
|
|
|
54,401 |
|
Deferred
compensation costs
|
|
|
- |
|
|
|
- |
|
|
|
319,553 |
|
Loss
on disposition of fixed assets
|
|
|
- |
|
|
|
- |
|
|
|
5,037 |
|
Loss
on disposition of investment
|
|
|
86,209 |
|
|
|
- |
|
|
|
86,209 |
|
Gain
on sale of HepatAssist program
|
|
|
- |
|
|
|
- |
|
|
|
(404,863 |
) |
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(126,329 |
) |
|
|
9,881 |
|
|
|
(147,837 |
) |
Other
assets
|
|
|
- |
|
|
|
20,939 |
|
|
|
(750 |
) |
Accounts
payable
|
|
|
(104,463 |
) |
|
|
9,278 |
|
|
|
89,583 |
|
Accrued
expenses
|
|
|
58,112 |
|
|
|
53,116 |
|
|
|
251,498 |
|
Other
liabilities
|
|
|
- |
|
|
|
- |
|
|
|
64,695 |
|
Liabilities
subject to settlement under reorganization
proceedings
|
|
|
111,029 |
|
|
|
- |
|
|
|
111,029 |
|
Contractual
obligation
|
|
|
- |
|
|
|
(100,000 |
) |
|
|
150,000 |
|
Net cash used in
operating activities
|
|
|
(253,986 |
) |
|
|
(1,100,248 |
) |
|
|
(16,469,906 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions of
property and equipment
|
|
|
- |
|
|
|
- |
|
|
|
(149,467 |
) |
Proceeds from
sale of fixed assets
|
|
|
- |
|
|
|
- |
|
|
|
4,176 |
|
Proceeds from
sale of HepatAssist program
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
Purchase of
short term investments
|
|
|
- |
|
|
|
- |
|
|
|
(21,866,787 |
) |
Maturities of
short term investments
|
|
|
- |
|
|
|
- |
|
|
|
21,866,787 |
|
Net cash provided from
investing activities
|
|
|
- |
|
|
|
- |
|
|
|
104,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
400,000 |
|
Proceeds
from common stock option/warrant exercise
|
|
|
- |
|
|
|
- |
|
|
|
67,900 |
|
Net
proceeds from issuance of common stock and warrants
|
|
|
- |
|
|
|
- |
|
|
|
15,797,080 |
|
Net
proceeds from issuance of preferred stock
|
|
|
- |
|
|
|
- |
|
|
|
238,732 |
|
Payments
on capital lease obligation, net
|
|
|
- |
|
|
|
- |
|
|
|
(21,815 |
) |
Net cash provided by
financing activities
|
|
|
- |
|
|
|
- |
|
|
|
16,481,897 |
|
Net (decrease)
increase in cash
|
|
|
(253,986 |
) |
|
|
(1,100,248 |
) |
|
|
116,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
370,686 |
|
|
|
2,735,944 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$ |
116,700 |
|
|
$ |
1,635,696 |
|
|
$ |
116,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of
non-cash financing activity
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of securities for obligation related to finder's
fees
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
47,500 |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS
SYSTEMS, INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
PERIOD FROM AUGUST 23, 2000
(INCEPTION) TO MARCH 31, 2009
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
During the
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Costs
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, August 23, 2000
(inception) restated for effect of reverse merger with Historical
Autographs U.S.A. Inc.
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issuance in exchange for
cash
|
|
|
|
|
|
|
|
|
|
|
5,000,000 |
|
|
|
50 |
|
|
|
4,950 |
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,454 |
) |
|
|
(9,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2000,
as restated
|
|
|
- |
|
|
|
- |
|
|
|
5,000,000 |
|
|
|
50 |
|
|
|
4,950 |
|
|
|
- |
|
|
|
(9,454 |
) |
|
|
(4,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of junior preferred stock
for cash of $250,000 and in exchange for $400,000 in patent rights,
fresearch and development costs, and employee loanout costs less
issuance expenses of $11,268, June 29, 2001
|
|
|
681,818 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
958,278 |
|
|
|
(343,553 |
) |
|
|
|
|
|
|
614,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in
exchange for patent rights and deferred research and development
costs
|
|
|
|
|
|
|
|
|
|
|
362,669 |
|
|
|
4 |
|
|
|
547,284 |
|
|
|
|
|
|
|
|
|
|
|
547,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(550,000 |
) |
|
|
|
|
|
|
(550,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred employee loan-out costs
receivable earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,888 |
|
|
|
|
|
|
|
82,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(237,574 |
) |
|
|
(237,574 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2001
|
|
|
681,818 |
|
|
|
7 |
|
|
|
5,362,669 |
|
|
|
54 |
|
|
|
1,510,512 |
|
|
|
(810,665 |
) |
|
|
(247,028 |
) |
|
|
452,880 |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS
SYSTEMS, INC.
|
|
(Debtor-in-Possession)
|
|
(A Development Stage
Company)
|
|
CONDENSED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
PERIOD FROM AUGUST 23, 2000
(INCEPTION) TO MARCH 31, 2009
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
During the
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Costs
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amendment of December 31, 2001
agreement for the issuance of common stock agreement in exchange for
research and development services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(495,599 |
) |
|
|
550,000 |
|
|
|
|
|
|
54,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred employee loan out costs
receivable earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,776 |
|
|
|
|
|
|
171,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
compensation
|
|
|
|
|
|
|
|
|
70,000 |
|
|
|
1 |
|
|
|
10,499 |
|
|
|
|
|
|
|
|
|
|
10,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
cash
|
|
|
|
|
|
|
|
|
999,111 |
|
|
|
9 |
|
|
|
149,857 |
|
|
|
|
|
|
|
|
|
|
149,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(494,780 |
) |
|
|
(494,780 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2002
|
|
|
681,818 |
|
|
|
7 |
|
|
|
6,431,780 |
|
|
|
64 |
|
|
|
1,175,269 |
|
|
|
(88,889 |
) |
|
|
(741,808 |
) |
|
|
344,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash
less issuance expense of $2,956
|
|
|
|
|
|
|
|
|
|
|
417,000 |
|
|
|
417 |
|
|
|
246,827 |
|
|
|
|
|
|
|
|
|
|
|
247,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in
private placement for cash less issuance expense of
$519,230
|
|
|
|
|
|
|
|
|
|
|
4,000,000 |
|
|
|
4,000 |
|
|
|
3,476,770 |
|
|
|
|
|
|
|
|
|
|
|
3,480,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
convertible debenture less issuance expense of
$49,500
|
|
|
|
|
|
|
|
|
|
|
400,000 |
|
|
|
400 |
|
|
|
350,100 |
|
|
|
|
|
|
|
|
|
|
|
350,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued in connection with
acquisition of Historical Autographs U.S.A., Inc. on October 30,
2003
|
|
|
|
|
|
|
|
|
|
|
1,220,000 |
|
|
|
8,263 |
|
|
|
(8,263 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS
SYSTEMS, INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
PERIOD FROM AUGUST 23, 2000
(INCEPTION) TO MARCH 31, 2009
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
During the
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Costs
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of warrants and beneficial
conversion feature of bridge loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
244,795 |
|
|
|
|
|
|
|
|
|
244,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred employee loan-out costs
receivable earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,889 |
|
|
|
|
|
|
88,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock Converted to
Common Stock
|
|
|
(681,818 |
) |
|
|
(7 |
) |
|
|
681,818 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(885,693 |
) |
|
|
(885,693 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2003
|
|
|
- |
|
|
|
- |
|
|
|
13,150,598 |
|
|
|
13,151 |
|
|
|
5,485,498 |
|
|
|
- |
|
|
|
(1,627,501 |
) |
|
|
3,871,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
and warrants for compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
972,430 |
|
|
|
|
|
|
|
|
|
|
|
972,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of common stock
options
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
18 |
|
|
|
2,682 |
|
|
|
|
|
|
|
|
|
|
|
2,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of securities for
payable
|
|
|
|
|
|
|
|
|
|
|
47,499 |
|
|
|
47 |
|
|
|
47,451 |
|
|
|
|
|
|
|
|
|
|
|
47,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,327,827 |
) |
|
|
(3,327,827 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2004
|
|
|
- |
|
|
|
- |
|
|
|
13,216,097 |
|
|
|
13,216 |
|
|
|
6,508,061 |
|
|
|
- |
|
|
|
(4,955,328 |
) |
|
|
1,565,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in
private placement for cash less issuance expense of
$384,312
|
|
|
|
|
|
|
|
|
|
|
2,991,812 |
|
|
|
2,992 |
|
|
|
6,224,601 |
|
|
|
|
|
|
|
|
|
|
|
6,227,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
and warrants for compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
557,080 |
|
|
|
|
|
|
|
|
|
|
|
557,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of common stock
options
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
25 |
|
|
|
62,475 |
|
|
|
|
|
|
|
|
|
|
|
62,500 |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS
SYSTEMS, INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
PERIOD FROM AUGUST 23, 2000
(INCEPTION) TO MARCH 31, 2009
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
During the
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Costs
|
|
|
Stage
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,823,903 |
) |
|
|
(3,823,903 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2005
|
|
|
- |
|
|
|
- |
|
|
|
16,232,909 |
|
|
|
16,233 |
|
|
|
13,352,217 |
|
|
|
- |
|
|
|
(8,779,231 |
) |
|
|
4,589,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock in
private placement for cash less issuance expense of
$95,013
|
|
|
|
|
|
|
|
|
|
|
1,227,272 |
|
|
|
1,227 |
|
|
|
1,253,760 |
|
|
|
|
|
|
|
|
|
|
|
1,254,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock options
and warrants for compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
703,839 |
|
|
|
|
|
|
|
|
|
|
|
703,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrant term
extension
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
482,964 |
|
|
|
|
|
|
|
|
|
|
|
482,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,284,841 |
) |
|
|
|
|
|
|
|
|
|
|
(1,284,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,461,904 |
) |
|
|
(4,461,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2006
|
|
|
- |
|
|
|
- |
|
|
|
17,460,181 |
|
|
|
17,460 |
|
|
|
14,507,939 |
|
|
|
- |
|
|
|
(13,241,135 |
) |
|
|
1,284,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in
accounting principle:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjust retained earnings at
January 1, 2007 for change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(521,187 |
) |
|
|
(521,187 |
) |
Reclassification of
warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,284,841 |
|
|
|
|
|
|
|
|
|
|
|
1,284,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and
warrants in private placement for cash less issuance expense of
$377,169
|
|
|
|
|
|
|
|
|
|
|
7,478,462 |
|
|
|
7,479 |
|
|
|
4,476,352 |
|
|
|
|
|
|
|
|
|
|
|
4,483,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of common stock
warrants
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
18 |
|
|
|
2,682 |
|
|
|
|
|
|
|
|
|
|
|
2,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option based compensation
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438,263 |
|
|
|
|
|
|
|
|
|
|
|
438,263 |
|
The accompanying notes are an integral
part of these condensed financial statements.
ARBIOS
SYSTEMS, INC.
|
(Debtor-in-Possession)
|
(A Development Stage
Company)
|
CONDENSED STATEMENT OF
STOCKHOLDERS' EQUITY (DEFICIT)
|
PERIOD FROM AUGUST 23, 2000
(INCEPTION) TO MARCH 31, 2009
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
During the
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Deferred
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Costs
|
|
|
Stage
|
|
|
Total
|
|
Stock warrant term
extension
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
59,025 |
|
|
|
|
|
|
|
|
|
59,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock based
compensation expense
|
|
|
|
|
|
|
|
|
621,818 |
|
|
|
621 |
|
|
|
315,604 |
|
|
|
|
|
|
|
|
|
316,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants for patent
acquistion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,570 |
|
|
|
|
|
|
|
|
|
74,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,552,650 |
) |
|
|
(5,552,650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2007
|
|
|
- |
|
|
|
- |
|
|
|
25,578,461 |
|
|
|
25,578 |
|
|
|
21,159,276 |
|
|
|
- |
|
|
|
(19,314,972 |
) |
|
|
1,869,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option based compensation
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,824 |
|
|
|
|
|
|
|
|
|
|
|
114,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock warrant term
extension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,256 |
|
|
|
|
|
|
|
|
|
|
|
175,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock based
compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107,933 |
|
|
|
|
|
|
|
|
|
|
|
107,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for
compensation
|
|
|
|
|
|
|
|
|
|
|
214,286 |
|
|
|
214 |
|
|
|
59,786 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,273,501 |
) |
|
|
(2,273,501 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2008
|
|
|
- |
|
|
|
- |
|
|
|
25,792,747 |
|
|
|
25,792 |
|
|
|
21,617,075 |
|
|
|
- |
|
|
|
(21,588,473 |
) |
|
|
54,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock shares surrendered by
shareholder
|
|
|
|
|
|
|
|
|
|
|
(1,436,500 |
) |
|
|
(1,436 |
) |
|
|
1,436 |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(279,463 |
) |
|
|
(279,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31,
2009
|
|
|
- |
|
|
|
- |
|
|
|
24,356,247 |
|
|
$ |
24,356 |
|
|
$ |
21,618,511 |
|
|
$ |
- |
|
|
$ |
(21,867,936 |
) |
|
$ |
(225,069 |
) |
The accompanying notes are an integral
part of these condensed financial statements.
Arbios
Systems, Inc.
(Debtor-in-Possession)
(A
Development Stage Company)
Notes
to Condensed Financial Statements (Unaudited)
Three
Months Ended March 31, 2009
(1)
Basis of Presentation
Arbios
Systems, Inc. is a Delaware corporation with its corporate office in Pasadena,
California. To date, our goal was to seek to develop, manufacture and
market liver assist therapies to meet the urgent need for medical treatment of
liver failure.
Since
Arbios Systems, Inc. was incorporated in February 1999, we have been a medical
device and cell-therapy company that was focused on the development of products
for the treatment of liver failure. Our lead product candidate which was under
development during 2008 consisted of a novel extracorporeal blood purification
therapy called the SEPET™ Liver Assist Device. Until recently, we
also owned the rights to an extracorporeal, bioartificial liver therapy referred to as the HepatAssist™
Cell-Based Liver Support System which incorporates porcine pig liver
cells, which we sold in October 2008. Because of our limited
financial resources, all of our development activities during the past few years
have focused on our SEPET™ Liver Assist Device. In September 2007, we
announced the results of our 15-patient feasibility clinical study of our SEPET™
Liver Assist Device, targeted for the treatment of acute episodes of chronic
liver disease, in which 79% of the 14 treated patients met the primary clinical
effectiveness endpoint. Based on the results of the feasibility
study, in February 2008, the U.S. Food and Drug Administration (“FDA”) granted
us conditional approval of an Investigational Device Exemption, or IDE,
application to begin the pivotal clinical trial for SEPET™. In May
2008, we received approval to begin the first segment of our pivotal clinical
trial for SEPETTM. The
budget to complete this clinical trial and our other projected operating
expenses, however, far exceeded the limited financial resources available to us
at that time.
As
a development stage company engaged solely in the development of new products,
we did not generate revenues from our activities and, accordingly, we were
solely dependent upon our ability to raise funding from investors to finance
both our operating expenses and the cost of developing our
technologies. Due in part to the global economic crisis in 2008 and
the dramatic decline in the availability of financing, particularly to
development stage companies, we were unable to raise the capital we needed to
finance our operational and developmental activities. As a result, in
order to preserve our remaining cash while seeking financing and while
attempting to otherwise maximize the value of our assets, in mid-2008 we
terminated all of our employees and suspended the majority of our
operations. Since then, all of our activities have been conducted by
our interim Chief Executive Officer and our interim Chief Financial Officer,
both of whom we engaged as part-time consultants. We have not
conducted any active operations since mid-2008, and our sole activity since that
time has been to (i) seek sufficient capital to re-initiate our operations, (ii)
find a strategic partner to co-develop our technologies with us, or (iii) sell
our technologies and assets in a manner that will maximize shareholder
value. Consistent with this Plan, in October 2008, we sold the
HepatAssistTM
Cell-Based Liver Support System to HepaLife Technologies, Inc. (“HepaLife”) for
(a) $450,000 in cash, of which $250,000 was paid in October 2008 and the
remaining $200,000 was deferred for up to 18 months from the date of sale, and
(b) a warrant to purchase 750,000 shares of HepaLife common stock at an exercise
price of $0.35 per share. On April 1, 2009, HepaLife agreed to pay us
the $200,000 deferred payment immediately, in return for the cancellation of the
warrant to purchase 750,000 shares of HepaLife common stock that was part of the
consideration in our sale of HepatAssistTM to
HepaLife. On April 22, 2009, we received the $200,000 deferred
payment from HepaLife and consequently canceled our rights with respect to the
warrant to purchase 750,000 shares of HepaLife common stock.
Liquidity
and Going Concern
The
accompanying condensed financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has incurred a net
operating loss of $279,463 for the quarter ended March 31, 2009 and an
accumulated deficit of $21,867,936 at March 31, 2009. This factor
raises substantial doubt about the Company’s ability to continue as a going
concern.
Voluntary
Chapter 11 Filing
On
January 9, 2009, the Company filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United
States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”),
Case Number 09-10082 (the “Bankruptcy”). We are continuing to operate
as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and the orders
of the Bankruptcy Court. In general, as a debtor-in-possession, our
current management supervises our activities as authorized under the Bankruptcy
Code, but may not engage in transactions outside the ordinary course of business
without the prior approval of the Bankruptcy Court.
Pending
$1,000,000 Investment and Recapitalization
One of
the principal reasons for commencing the Bankruptcy was to permit the orderly
sale of our remaining assets and technologies under court protection and/or to
recapitalize our company. Consistent with our goals, on March 9, 2009
we entered into a binding term sheet (the “Term Sheet”) with Arbios Acquisition
Partners, LLC (“Acquisition Partners”), an unrelated, privately held, limited
liability company formed for the purpose of effecting the transaction
contemplated by the Term Sheet. Pursuant to the Term Sheet, subject
to the approval of the Bankruptcy Court, we agreed that we would (i) cancel all
of our currently existing equity (including, but not limited to, any and all
outstanding common and preferred shares of stock, warrants, and options), (ii)
issue new shares of our common stock to Acquisition Partners representing 90% of
our newly issued shares, and (iii) issue to our existing shareholders new shares
of our common stock equal to 10% of our newly issued shares pro
rata. In consideration for issuing the new shares to it, Acquisition
Partners agreed to pay us $1,000,000 in cash.
The
$1,000,000 cash purchase price to be paid by Acquisition Partners for 90% of our
new shares of common stock is required to be paid as follows: (1) $100,000 was
paid to us at the time that the Term Sheet was signed, (2) $100,000 was paid to
us on May 1, 2009, and (3) $800,000 is due within 10 days following the
confirmation of the Plan of Reorganization. The $100,000
payment from Acquisition Partners has been categorized as restricted cash on our
balance sheet and is held in escrow with our bankruptcy counsel in an Interest
on Lawyer Account “IOLA”. We also received the second $100,000
payment from Acquisition Partners on April 22, 2009. We expect to consummate the transaction
with Acquisition Partners, but we are not prohibited from effecting a different
transaction with other parties. Additionally, we have agreed to pay Acquisition
Partners a break up fee of 3% of the funds deposited by Acquisition Partners if
we elect not to consummate the transaction contemplated by the Term Sheet and
elect to enter into an alternative transaction, such as signing a letter of
intent or term sheet with a third party for the sale of some or all of our
assets prior to confirmation of the plan of reorganization. Also, if
we exercise our option to transact business with a third party rather than with
Acquisition Partners, then Acquisition Partners would also be entitled to a
return of all funds that they have paid to us prior to such
date. However, we do not have to return Acquisition Partners’ deposit
if we elect to sell our assets to a third party because Acquisition Partners
fails to pay the final $800,000 payment.
If
Acquisition Partners does not pay the final $800,000 by the required payment
date, we will retain the $200,000 that Acquisition Partners has paid so far, and
we can then withdraw the current Plan of Reorganization, terminate that plan,
and/or enter into an alternate transaction with other entities interested in
acquiring our Company or our assets. If our Plan of Reorganization to
approve the investment by Acquisition Partners has not been confirmed by June
15, 2009, we will be obligated to return to Acquisition Partners its $200,000
payment, less costs and expenses, (including, without limitation, administrative
expenses) incurred by us in pursuing the Plan of Reorganization.
Certain terms of the Term
Sheet have thus far been approved by the Bankruptcy Court. The
Bankruptcy Court has also approved the use of our Plan of Reorganization as a
disclosure statement that was mailed to our creditors and
stockholders. The Bankruptcy Court has scheduled a hearing on
June 2, 2009 at which, pending shareholder and/or creditor approval, the Plan of
Reorganization is expected to be approved. No assurance can, however,
be given that the Bankruptcy Court will ultimately approve the Term Sheet and
the transactions contemplated thereby.
Plan
of Reorganization; Recapitalization of our Company
On April
3, 2009, we filed a motion to conditionally approve our Chapter 11 Plan of
Reorganization as the disclosure statement (the motion to conditionally approve
the disclosure statement and the Plan of Reorganization is herein referred to as
the “Plan”). On April 20, 2009, the Bankruptcy Court confirmed the
use of the Plan of Reorganization as a disclosure statement.
Upon
confirmation of the Plan by the Bankruptcy Court, we expect to consummate the
transaction with Acquisition Partners as described in the Term Sheet, and our
Company is expected to thereafter emerge from Bankruptcy as
follows:
|
·
|
Administrative and Priority Claims
are expected to be paid in full and Allowed General Unsecured Claim
Holders should receive 90% of the principal amount of their Allowed
Claim.
|
|
·
|
90%
of our common stock is expected to be owned by Acquisition Partners, and
10% should be owned by all of our stockholders who own shares on the date
that the Plan is confirmed. The 10% of our stock that is
expected to be issued to our existing stockholders will be issued pro rata
based on the number of shares each stockholder owned prior to the
confirmation. As part of this transaction, all currently
outstanding shares of our common stock are expected to be cancelled on the
date of confirmation, and new shares should be issued for the shares that
are cancelled.
|
|
·
|
All
currently outstanding options and warrants are expected to be cancelled
and will cease to exist.
|
|
·
|
We
are expected to receive an infusion of $1,000,000 in the aggregate from
Acquisition Partners, which amount is expected to be used to fund our
working capital needs and possibly for the further development of our
technology.
|
|
·
|
All
of our officers and directors will resign, and new officers and directors
designated by Acquisition Partners will be
appointed. Acquisition Partners has designated the following
persons to hold the following offices with this company after the
Bankruptcy if the Plan is confirmed: Tom Fagan--Director,
Chairman of the Board, CEO and President; Cara Fagan--Director, Secretary
and Treasurer; John
Desiderio--Director.
|
|
·
|
Arbios
Systems, Inc. is expected to remain a public company whose shares are
listed for trading on the OTC Bulletin Board, or some other trading
platform.
|
|
·
|
We
have previously in-licensed a family of issued U.S. patents and various
U.S. and foreign patent applications from Immunocept LLC, including five
issued U.S. patents, four pending U.S. patents, and two pending European
patents. On January 2, 2009, Immunocept, LLC declared a default
in the foregoing license with us. Immunocept and Acquisition
Partners are currently in discussions regarding certain amendments to the
License Agreement, not all of which have been agreed to. While
incorporation of any amended License Agreement in the Plan is not a
condition to the Term Sheet, if an amended License Agreement is not
assumed as part of the Plan, this could affect Acquisition Partners’
completion of its funding of the Plan, and/or the Company’s business plan
following any emergence from
bankruptcy.
|
The
confirmation of the Plan may occur on June 2, 2009, the date of our next
scheduled hearing with the Bankruptcy Court. No assurance however can
be given that the Plan will be confirmed by that date, or at all.
The unaudited condensed financial
statements and notes are presented as permitted by Form 10-Q. These
unaudited condensed financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United States of America, have been omitted pursuant to such
SEC rules and regulations. In the opinion of the management of the
Company, the accompanying unaudited condensed financial statements include all
adjustments, including those that are normal and recurring considered necessary
to present fairly the financial position of the Company as of March 31, 2009,
and the results of operations for the periods presented. These
unaudited condensed financial statements should be read in conjunction with the
Company's audited financial statements and the accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2008 as
filed with the SEC. The Company expects that its operating results
will fluctuate for the foreseeable future. Therefore,
period-to-period comparisons should not be relied upon as predictive of the
results in future periods. The results of operations for the three
months ended March 31, 2009 are not necessarily indicative of the results to be
expected for any subsequent periods or for the entire 2009 fiscal
year.
(2)
Reorganization Items Related to Chapter 11 Proceeding
According to Statement of Position
90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code,” we have prepared the financial statements to reflect items which are
affected by our Chapter 11 bankruptcy status. Accordingly, $111,029
of pre-petition liabilities (liabilities recorded prior to our bankruptcy
petition filing on January 9, 2009) have been segregated from accounts payable
on the balance sheet. On the income statement, professional fees
incurred for services rendered in connection with the Chapter 11 proceeding
totaled approximately $74,000.
(3)
Recent Accounting Pronouncements
On June
27, 2007, the FASB reached a final consensus on EITF Issue No. 07-03:
“Accounting for Advance Payments for Goods or Services to Be Used in Future
Research and Development Activities” (“EITF 07-03”). Currently, under FASB
Statement No. 2: “Accounting for Research and Development Costs,” nonrefundable
advance payments for future research and development activities for materials,
equipment, facilities and purchased intangible assets that have no alternative
future use are expensed as incurred. EITF 07-03 addresses whether such
non-refundable advance payments for goods or services that have no alternative
future use and that will be used or rendered for research and development
activities should be expensed when the advance payments are made or when the
research and development activities have been performed. The consensus reached
by the FASB requires companies involved in research and development activities
to capitalize such non-refundable advance payments for goods and services
pursuant to an executory contractual arrangement because the right to receive
those services in the future represents a probable future economic benefit.
Those advance payments will be capitalized until the goods have been delivered
or the related services have been performed. Entities will be required to
evaluate whether they expect the goods or services to be rendered. If an entity
does not expect the goods to be delivered or services to be rendered, the
capitalized advance payment will be charged to expense. The consensus on EITF
07-03 is effective for financial statements issued for fiscal years beginning
after December 15, 2007, and interim periods within those fiscal years. Earlier
application is not permitted. Entities are required to recognize the effects of
applying the guidance in EITF 07-03 prospectively for new contracts entered into
after the effective date. In accordance with EITF 07-03, the Company does
evaluate its research and development contracts and payments within the guidance
of EITF 07-03 and either expenses or capitalizes such payments based upon the
contract terms.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” The new standard is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable users of the financial statements to better
understand the effects on an entity’s financial position, financial performance,
and cash flows. It is effective for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008, with early application
encouraged. The Company is evaluating the impact of adopting SFAS 161 on our
financial statements.
(4)
Stock-Based Compensation:
During
the three months ended March 31, 2009 and 2008, the Company recognized equity
based compensation expense for stock options of $0 and $47,000, respectively,
which was recognized in the Statement of Operations. As of March 31, 2009, there
was no unrecognized compensation costs related to non-vested
awards. As of March 31, 2009, there were 1,429,677 options to
purchase common stock outstanding under the Company’s 2005 Stock Option
Plan. However, if the Plan of Reorganization is approved, all of
these outstanding options will be cancelled.
(5)
Subsequent Event
Arbios Acquisition Partners
Transaction
On April 21, 2009 the Bankruptcy Court
issued a number of orders, dated April 20, 2009, one of which approved certain
terms in the Term Sheet and one of which conditionally approved the Plan as a
disclosure statement, and allowing the Company to solicit votes on the
Plan. Accordingly, the Company mailed the Plan of Reorganization as a
disclosure statement (including the ballots to accept or reject the Term Sheet
and the related Plan of Reorganization) to all of the holders of claims against
the Company and to all of the Company’s stockholders.
On May 1,
2009, Acquisition Partners made the second $100,000 deposit under the provisions
of the Term Sheet. Accordingly, to date, as required by the
Term Sheet, Acquisition Partners has made deposits totaling $200,000 to the
Company, and the remaining $800,000 is due within 10 days following any
confirmation of the Plan of Reorganization by the Bankruptcy Court.
Sale of HepaLife
Technologies, Inc. Warrant
Pursuant to a Bankruptcy Court Order, on
April 22, 2009, the Company sold the five-year Series D warrant to purchase
up to 750,000 shares of HepaLife’s common stock at an exercise price of $0.35
per share (the “Warrant”) back to HepaLife in consideration for
the early payment of the $200,000 Deferred Purchase Price, which funds were
received by the Company on April 22, 2009. The closing price of
HepaLife’s common stock on the OTC Bulletin Board on April 22, 2009 was $0.19
per share. The surrender of the Warrant in exchange for the
acceleration of the $200,000 Deferred Purchase Price payment resulted in a “loss
on investment” of $86,209.
ITEM
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
SAFE
HARBOR STATEMENT
In addition to historical
information, the information included in this Quarterly Report on Form 10-Q
contains forward-looking statements, such as those pertaining to the pending
Chapter 11 bankruptcy proceedings, our ability to sell our assets in the
bankruptcy proceedings, the approval of the pending Plan of
Reorganization, our ability to operate following bankruptcy, our capital
resources, our future ability to complete the research and development of our
product candidates, and our ability to obtain regulatory approval for our
product candidates. Forward-looking statements involve numerous risks
and uncertainties and should not be relied upon as predictions of future events.
Certain such forward-looking statements can be identified by the use of
forward-looking terminology such as ''believes,'' ''expects,'' ''may,''
''will,'' ''should,'' ''seeks,'' ''approximately,” ''intends,'' ''plans,'' ''pro
forma,'' ''estimates,'' or ''anticipates'' or other variations thereof or
comparable terminology, or by discussions of strategy, plans or intentions. Such
forward-looking statements are necessarily dependent on assumptions, data or
methods that may be incorrect or imprecise and may be incapable of being
realized. The following factors, among others, including those risks set forth
under “Factors That May Affect our Business And Our Future Results and Market
Price of Our Stock,” included in Item 6 “Management’s Discussion and Analysis of
Plan of Operation” of our Annual Report on Form 10-K for the year ended December
31, 2008 and other filings we make with the Securities and Exchange
Commission could cause actual results and
future events to differ materially from those set forth or contemplated in the
forward-looking statements: need for a significant amount of additional capital,
lack of revenue, uncertainty of product development, ability to obtain
regulatory approvals in the United States and other countries, and
competition. Readers are cautioned not to place undue reliance on
forward-looking statements, which reflect our management's analysis only. We
assume no obligation to update forward-looking statements.
Overview
During
the past few years, our efforts have been principally devoted to research and
development activities, raising capital, and recruiting additional scientific
and management personnel and advisors. We have not marketed or sold
any product and have not generated any revenues from commercial
activities.
In May
2008, we received approval from the FDA to commence a Phase II/III pivotal
clinical trial for SEPETTM. We
estimated that the cost of completing these trials was between $5 million and
$10 million. As we have done since our inception, we intended to
raise the funds to complete our development from financing
transactions. Unfortunately, because of the global economic crisis in
2008 and the dramatic decline in the availability of financing, particularly to
development stage companies like ours, we were unable to raise the capital we
needed to finance our operations and development activities. As a
result, in order to preserve our remaining cash while seeking financing and
while attempting to otherwise maximize the value of our assets, in mid-2008 we
terminated all of our employees and suspended most of our
operations. We have not conducted any active operations since
mid-2008, and our sole activity since that time has been to (i) seek sufficient
capital to re-initiate our operations, (ii) find a strategic partner to
co-develop our technologies with us, or (iii) sell our technologies and assets
in a manner that will maximize shareholder value.
On
January 9, 2009, this Company filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the District of Delaware. We are continuing to exist as a
debtor-in-possession under the jurisdiction of the Bankruptcy
Court.
On March
9, 2009, we entered into a Term Sheet with Acquisition Partners pursuant to
which Acquisition Partners agreed to invest $1,000,000 for the purchase of 90%
of our common stock. To date, Acquisition Partners has paid us
$200,000 of that purchase price, part or all of which may need to be refunded
under certain circumstances. The Bankruptcy Court has approved
portions of that the proposed transaction. The Plan of
Reorganization to approve that transaction has been submitted to our creditors
and stockholders for approval.
In order
to have sufficient funds to operate, in October 2008, we sold our
HepatAssistTM
Cell-Based Liver Support System to HepaLife Technologies, Inc.
(“HepaLife”). We had purchased HepatAssistTM in
April 2004 for $450,000 but have not further developed that
technology. We agreed to sell HepatAssistTM to
HepaLife for (a) $450,000 in cash, of which $250,000 was paid in October 2008
and the remaining $200,000 deferred payment was to be paid within 18 months from
the date of sale, and (c) a warrant to purchase 750,000 shares of Series D
common stock at an exercise price of $0.35 per share. HepaLife
prepaid the $200,000 deferred payment on April 22, 2009, in consideration for
the cancellation of the warrant to purchase 750,000 shares of HepaLife Series D
common stock.
Our
future operations, if any, will depend upon whether the Bankruptcy Court
confirms the Plan or any other Plan of Reorganization under Chapter
11. In addition, since all of our current officers and directors will
resign, and new officers and directors will be appointed upon the approval of
the Plan and the conclusion of the Chapter 11 proceedings, we are unable to
discuss the future plans of this Company following the bankruptcy
proceedings.
Critical
Accounting Policies
This
discussion is based on our unaudited condensed financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these unaudited condensed financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis,
management evaluates its estimates, including those related to revenue
recognition, impairment of long-lived assets and their useful lives, including
finite lived intangible costs, accrued liabilities and certain
expenses. We base our estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ materially from these
estimates under different assumptions or conditions.
Our
significant accounting policies are summarized in Note 1 to our audited
financial statements for the year ended December 31, 2008 included in our Annual
Report on Form 10-K as filed with the Securities and Exchange
Commission. We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of
our unaudited condensed financial statements:
Development
Stage Enterprise
We are a
development stage enterprise as defined by the Financial Accounting Standards
Board's, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 7,
"Accounting and Reporting by Development Stage Enterprises." All
losses accumulated since our inception have been considered part of our
development stage activities.
Cash
and cash equivalents
Cash and
cash equivalents consist of a debtor-in-possession checking
account.
Stock-Based
Compensation
Commencing
January 1, 2006, we adopted SFAS No. 123R, “Share Based Payment”, or SFAS 123R,
which requires all share based payments, including grants of stock options, to
be recognized in the income statement as an operating expense, based on fair
values.
Prior to
adopting SFAS 123R, we accounted for stock-based employee compensation under
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” as allowed by SFAS No. 123, “Accounting for Stock-Based
Compensation,” the predecessor to SFAS 123R. Accordingly, we have applied the
modified prospective method in adopting SFAS 123R whereby periods prior to
adoption have not been restated.
Accounting
for Uncertainty in Income Taxes
In July
2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes,” or FIN 48. This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity’s financial statements and prescribes a recognition
threshold of more-likely-than-not to be sustained upon examination. Measurement
of the tax uncertainty occurs if the recognition threshold has been met. FIN 48
also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. In the normal course
of business we are subject to examination by taxing authorities. At present,
there are no ongoing audits or unresolved disputes with the various tax
authorities that we file with. Given our substantial net operating loss
carryforwards as well as historical operating losses, the adoption of FIN 48 on
January 1, 2007 did not have any effect on our financial position, results of
operations or cash flows as of or for the period ended March 31,
2009.
Results
of Operations
Since we
have been involved in developing our product candidates and do not have any
products available for sale, we have not yet generated any revenue from
sales. Inception to date revenue represents revenue recognized from
an SBIR government grant.
General
and administrative expenses of $120,000 and $719,000 were incurred for the three
months ended March 31, 2009 and 2008, respectively. General and
administrative expenses for the three months ended March 31, 2009 decreased by
$599,000 from the prior year’s level, reflecting our suspended operations
beginning in the September 30, 2008 fiscal quarter. The decrease is
primarily attributed to a $271,000 decrease in non cash option and warrant
charges due to a decline in the number of stock options granted, a decline in
the Company’s stock price and a non recurring 2008 charge incurred for warrant
extensions, a $76,000 decline in payroll costs due to staff reductions and a
$133,000 decrease in legal and accounting fees from the curtailment of patent
work and a decline in contract negotiating costs in 2009. In
addition, there also was an overall decline in virtually all expense categories
as a result of curtailed operations due to a lack of capital resources and our
voluntary Chapter 11 bankruptcy filing on January 9, 2009.
Research
and development expenses of $0 and $710,000 were incurred for the three months
ended March 31, 2009 and 2008, respectively. The research and
development expenses for the three months ended March 31, 2009 decreased by
$710,000 over the comparable prior year level due to the curtailment of all
research and development activities in the fourth quarter of 2008 due to a lack
of capital resources and our voluntary Chapter 11 bankruptcy filing on January
9, 2009.
Reorganization
costs for the three months ended March 31, 2009 were $73,864 and consist
primarily of legal fees incurred related to the bankruptcy.
Loss on
investment for the three months ended March 31, 2009 resulted from the surrender
and cancellation of the HepaLife warrant in exchange for an acceleration and
prepayment of a $200,000 receivable payment due from HepaLife.
Interest
income of $229 and $20,300 was earned for the three months ended March 31, 2009
and 2008, respectively. The change in interest income primarily
reflects lower cash and cash equivalent balances in 2009 from prior year levels
and a decline in interest rates earned on our cash account.
Our net
loss was $279,000 and $1,410,000 for the three months ended March 31, 2009 and
2008, respectively. The decrease in net loss for the three months ended March
31, 2009 compared to the comparable period in 2008 is due to the curtailment of
operating and research and development activities due to the lack of capital
resources.
Liquidity
and Capital Resources
As of
March 31, 2009, we had cash of approximately $117,000, restricted cash of
$100,000, current liabilities of approximately $535,000, liabilities subject to
settlement under reorganization proceedings of $111,000 and long term contract
obligations of $150,000 related to patent acquisitions. To date, we
have funded our operations primarily from the sale of equity securities and, to
a lesser extent, from the sale of assets related to the HepatAssist™ program,
SBIR grants.
We do not
have any bank credit lines. We do not currently anticipate that we
will derive any revenues from either product sales or from governmental research
grants during the current fiscal year nor do we anticipate that we
will derive any revenue from either product sales or from governmental research
grants in the foreseeable future. The cost of completing the development of our
product candidates and of obtaining all required regulatory approvals to market
our product candidates is substantially greater than the amount of funds we
currently have available and substantially greater than the amount we could
possibly receive under any governmental grant program.
Because
we did not have the financial resources to continue to develop our products, on
January 9, 2009 we filed for protection under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware. The Bankruptcy enabled us to continue to seek investors in
our equity and bids for the purchase of our assets while working with our
creditors. Our Board of Directors determined that, in light of our
limited cash position and the current economic conditions and financial markets,
the best course of action was to obtain financing and/or sell our assets under
bankruptcy protection.
Our
operating expenses while in Bankruptcy have been funded from our remaining cash
reserves. In addition, we received $200,000 on April 22, 2009 in an
accelerated receivable payment in exchange for the cancellation of the warrant
to purchase 750,000 shares of common stock to HepaLife. In addition,
we have also received a total of $200,000 in cash deposits from Acquisition
Partners, currently held in an IOLA with our Bankruptcy counsel as part of the
$1,000,000 investment we will receive from Acquisition Partners under the Term
Sheet, if the Term Sheet and the Plan are approved by the Bankruptcy
Court. The foregoing funds constitute our sole source of
liquidity. Assuming confirmation of the Plan by the Bankruptcy Court
and the closing of the transaction contemplated by the Term Sheet in June 2009,
we anticipate that we may have sufficient funds to pay our post petition
administrative costs and expenses, and at least 90% of the principal amount of
Allowed Claims of General Unsecured Claim Holders. However, the
Company’s expected cash balance upon any emergence from bankruptcy will not be
sufficient to complete the development of SEPETTM. Accordingly,
the Company will have to raise additional funds post-bankruptcy if it wishes to
continue development of SEPETTM.
If the
Plan is not confirmed by the Bankruptcy Court, or if Acquisition Partners for
any reason does not complete funding of the Plan, the Company will likely seek
bids for its assets and liquidate. There can be no assurance of any
proceeds that might be realized from the Company’s assets in the event of a
liquidation scenario.
Assuming
that our existing license agreement with Immunocept, LLC remains in effect and
are assumed in the bankruptcy proceeding without any modification, the following
is a summary of our contractual cash obligations for the following fiscal
years. However, if the license agreement is either modified or
rejected, the following payments may either be eliminated or
changed.
Contractual
Obligations
|
|
Total
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
License
Agreement
|
|
$ |
250,000 |
|
|
$ |
100,000 |
|
|
$ |
150,000 |
|
|
|
- |
|
|
$ |
– |
|
Total
|
|
$ |
250,000 |
|
|
$ |
100,000 |
|
|
$ |
150,000 |
|
|
|
- |
|
|
$ |
– |
|
We do not
believe that inflation has had a material impact on our business or
operations.
We do not
engage in trading activities involving non-exchange traded
contracts. In addition, we have no financial guarantees, debt or
lease agreements or other arrangements that could trigger a requirement for an
early payment or that could change the value of our assets.
Off-
Balance Sheet Arrangements
We are
not a party to any off-balance sheet arrangements.
ITEM
3. Qualitative and Quantitative Disclosures about Market
Risk.
Not applicable as we are a smaller
reporting company.
ITEM
4T. Controls and Procedures.
(a) Evaluation of Disclosure
Controls and Procedures. As of the end of the period covered by this
report, our company conducted an evaluation, under the supervision and with the
participation of our Interim Chief Executive Officer and Chief Financial
Officer, of our disclosure controls and procedures (as defined in
Rules 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the
Exchange Act). Based on this evaluation, our Interim Chief Executive
Officer and Interim Chief Financial Officer concluded that our company’s
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms, and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow timely decisions regarding required
disclosures.
(b) Changes in Internal
Controls. There was no change in our internal controls, which are
included within disclosure controls and procedures, during our most recently
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal controls.
(c) Limitations on the Effectiveness
of Controls. Our management, including our interim chief
executive officer and chief financial officer, does not expect that our
disclosure controls and procedures or our internal control over financial
reporting will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within an organization have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake.
PART
II. OTHER INFORMATION
ITEM
1. Legal Proceedings.
On
January 9, 2009, the Company filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United
States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”),
Case Number 09-10082 (the “Bankruptcy”). Other than the pending legal
proceedings before the Bankruptcy Court related to our Plan of Reorganization,
we are not engaged in any other legal proceedings.
ITEM
1A. Risk Factors.
Information regarding risk factors
appears under “Factors That May Affect our Business And Our Future Results and
Market Price of Our Stock,” included in Item 6 “Management’s Discussion and
Analysis of Plan of Operation” of our Annual Report on Form 10-K for the year
ended December 31, 2008 as filed with the Securities and Exchange Commission.
Except as set forth below, there have been no material changes from the risk
factors previously disclosed in that Annual Report on
Form 10-K.
ITEM
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
None.
ITEM
3. Defaults Upon Senior Securities.
None.
ITEM
4. Submission of Matters to a Vote of Security
Holders.
None.
ITEM
5. Other Information.
None.
31.1
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Certification
of Principal Executive Officer Pursuant to Section 302
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31.2
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Certification
of Principal Financial Officer Pursuant to Section 302
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32
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Section 906 certification of
periodic financial report by Chief Executive Officer and Chief Financial
Officer.
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
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ARBIOS
SYSTEMS, INC. |
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DATE:
May 19, 2009
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By:
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/S/
SHAWN P. CAIN |
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Shawn
P. Cain |
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Interim
Chief Executive Officer (Principal Executive Officer) |
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DATE:
May 19, 2009
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By:
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/S/
SCOTT L. HAYASHI |
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Scott
L. Hayashi |
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Interim
Chief Financial Officer (Principal Financial Officer)
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